Good evening. This is an
extraordinary period for America's economy. Over the past few weeks,
many Americans have felt anxiety about their finances and their future.
I understand their worry and their frustration. We've seen triple-digit
swings in the stock market. Major financial institutions have teetered
on the edge of collapse, and some have failed. As uncertainty has grown,
many banks have restricted lending. Credit markets have frozen. And
families and businesses have found it harder to borrow money.

We're in the midst of a
serious financial crisis, and the federal government is responding with
decisive action. We've boosted confidence in money market mutual funds,
and acted to prevent major investors from intentionally driving down
stocks for their own personal gain.

Most importantly, my
administration is working with Congress to address the root cause behind
much of the instability in our markets. Financial assets related to home
mortgages have lost value during the housing decline. And the banks
holding these assets have restricted credit. As a result, our entire
economy is in danger. So I've proposed that the federal government
reduce the risk posed by these troubled assets, and supply
urgently-needed money so banks and other financial institutions can
avoid collapse and resume lending.

This rescue effort is not
aimed at preserving any individual company or industry -- it is aimed at
preserving America's overall economy. It will help American consumers
and businesses get credit to meet their daily needs and create jobs. And
it will help send a signal to markets around the world that America's
financial system is back on track.

I know many Americans have
questions tonight: How did we reach this point in our economy? How will
the solution I've proposed work? And what does this mean for your
financial future? These are good questions, and they deserve clear
answers.

First, how did our economy
reach this point?

Well, most economists agree
that the problems we are witnessing today developed over a long period
of time. For more than a decade, a massive amount of money flowed into
the United States from investors abroad, because our country is an
attractive and secure place to do business. This large influx of money
to U.S. banks and financial institutions -- along with low interest
rates -- made it easier for Americans to get credit. These developments
allowed more families to borrow money for cars and homes and college
tuition -- some for the first time. They allowed more entrepreneurs to
get loans to start new businesses and create jobs.

Unfortunately, there were
also some serious negative consequences, particularly in the housing
market. Easy credit -- combined with the faulty assumption that home
values would continue to rise -- led to excesses and bad decisions. Many
mortgage lenders approved loans for borrowers without carefully
examining their ability to pay. Many borrowers took out loans larger
than they could afford, assuming that they could sell or refinance their
homes at a higher price later on.

Optimism about housing
values also led to a boom in home construction. Eventually the number of
new houses exceeded the number of people willing to buy them. And with
supply exceeding demand, housing prices fell. And this created a
problem: Borrowers with adjustable rate mortgages who had been planning
to sell or refinance their homes at a higher price were stuck with homes
worth less than expected -- along with mortgage payments they could not
afford. As a result, many mortgage holders began to default.

These widespread defaults
had effects far beyond the housing market. See, in today's mortgage
industry, home loans are often packaged together, and converted into
financial products called "mortgage-backed securities." These securities
were sold to investors around the world. Many investors assumed these
securities were trustworthy, and asked few questions about their actual
value. Two of the leading purchasers of mortgage-backed securities were
Fannie Mae and Freddie Mac. Because these companies were chartered by
Congress, many believed they were guaranteed by the federal government.
This allowed them to borrow enormous sums of money, fuel the market for
questionable investments, and put our financial system at risk.

The decline in the housing
market set off a domino effect across our economy. When home values
declined, borrowers defaulted on their mortgages, and investors holding
mortgage-backed securities began to incur serious losses. Before long,
these securities became so unreliable that they were not being bought or
sold. Investment banks such as Bear Stearns and Lehman Brothers found
themselves saddled with large amounts of assets they could not sell.
They ran out of the money needed to meet their immediate obligations.
And they faced imminent collapse. Other banks found themselves in severe
financial trouble. These banks began holding on to their money, and
lending dried up, and the gears of the American financial system began
grinding to a halt.

With the situation becoming
more precarious by the day, I faced a choice: To step in with dramatic
government action, or to stand back and allow the irresponsible actions
of some to undermine the financial security of all.

I'm a strong believer in
free enterprise. So my natural instinct is to oppose government
intervention. I believe companies that make bad decisions should be
allowed to go out of business. Under normal circumstances, I would have
followed this course. But these are not normal circumstances. The market
is not functioning properly. There's been a widespread loss of
confidence. And major sectors of America's financial system are at risk
of shutting down.

The government's top
economic experts warn that without immediate action by Congress, America
could slip into a financial panic, and a distressing scenario would
unfold:

More banks could fail,
including some in your community. The stock market would drop even more,
which would reduce the value of your retirement account. The value of
your home could plummet. Foreclosures would rise dramatically. And if
you own a business or a farm, you would find it harder and more
expensive to get credit. More businesses would close their doors, and
millions of Americans could lose their jobs. Even if you have good
credit history, it would be more difficult for you to get the loans you
need to buy a car or send your children to college. And ultimately, our
country could experience a long and painful recession.

Fellow citizens: We must not
let this happen. I appreciate the work of leaders from both parties in
both houses of Congress to address this problem -- and to make
improvements to the proposal my administration sent to them. There is a
spirit of cooperation between Democrats and Republicans, and between
Congress and this administration. In that spirit, I've invited Senators
McCain and Obama to join congressional leaders of both parties at the
White House tomorrow to help speed our discussions toward a bipartisan
bill.

I know that an economic
rescue package will present a tough vote for many members of Congress.
It is difficult to pass a bill that commits so much of the taxpayers'
hard-earned money. I also understand the frustration of responsible
Americans who pay their mortgages on time, file their tax returns every
April 15th, and are reluctant to pay the cost of excesses on Wall
Street. But given the situation we are facing, not passing a bill now
would cost these Americans much more later.

Many Americans are asking:
How would a rescue plan work?

After much discussion, there
is now widespread agreement on the principles such a plan would include.
It would remove the risk posed by the troubled assets -- including
mortgage-backed securities -- now clogging the financial system. This
would free banks to resume the flow of credit to American families and
businesses. Any rescue plan should also be designed to ensure that
taxpayers are protected. It should welcome the participation of
financial institutions large and small. It should make certain that
failed executives do not receive a windfall from your tax dollars. It
should establish a bipartisan board to oversee the plan's
implementation. And it should be enacted as soon as possible.

In close consultation with
Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke,
and SEC Chairman Chris Cox, I announced a plan on Friday. First, the
plan is big enough to solve a serious problem. Under our proposal, the
federal government would put up to $700 billion taxpayer dollars on the
line to purchase troubled assets that are clogging the financial system.
In the short term, this will free up banks to resume the flow of credit
to American families and businesses. And this will help our economy
grow.

Second, as markets have lost
confidence in mortgage-backed securities, their prices have dropped
sharply. Yet the value of many of these assets will likely be higher
than their current price, because the vast majority of Americans will
ultimately pay off their mortgages. The government is the one
institution with the patience and resources to buy these assets at their
current low prices and hold them until markets return to normal. And
when that happens, money will flow back to the Treasury as these assets
are sold. And we expect that much, if not all, of the tax dollars we
invest will be paid back.

A final question is: What
does this mean for your economic future?

The primary steps -- purpose
of the steps I have outlined tonight is to safeguard the financial
security of American workers and families and small businesses. The
federal government also continues to enforce laws and regulations
protecting your money. The Treasury Department recently offered
government insurance for money market mutual funds. And through the
FDIC, every savings account, checking account, and certificate of
deposit is insured by the federal government for up to $100,000. The
FDIC has been in existence for 75 years, and no one has ever lost a
penny on an insured deposit -- and this will not change.

Once this crisis is
resolved, there will be time to update our financial regulatory
structures. Our 21st century global economy remains regulated largely by
outdated 20th century laws. Recently, we've seen how one company can
grow so large that its failure jeopardizes the entire financial system.

Earlier this year, Secretary
Paulson proposed a blueprint that would modernize our financial
regulations. For example, the Federal Reserve would be authorized to
take a closer look at the operations of companies across the financial
spectrum and ensure that their practices do not threaten overall
financial stability. There are other good ideas, and members of Congress
should consider them. As they do, they must ensure that efforts to
regulate Wall Street do not end up hampering our economy's ability to
grow.

In the long run, Americans
have good reason to be confident in our economic strength. Despite
corrections in the marketplace and instances of abuse, democratic
capitalism is the best system ever devised. It has unleashed the talents
and the productivity, and entrepreneurial spirit of our citizens. It has
made this country the best place in the world to invest and do business.
And it gives our economy the flexibility and resilience to absorb
shocks, adjust, and bounce back.

Our economy is facing a
moment of great challenge. But we've overcome tough challenges before --
and we will overcome this one. I know that Americans sometimes get
discouraged by the tone in Washington, and the seemingly endless
partisan struggles. Yet history has shown that in times of real trial,
elected officials rise to the occasion. And together, we will show the
world once again what kind of country America is -- a nation that
tackles problems head on, where leaders come together to meet great
tests, and where people of every background can work hard, develop their
talents, and realize their dreams.